Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)

[ven]

Perhaps, as they seem to be in answering mode, you could call them again and ask the following:

1. Given that the members of the LLP are mostly UK resident, would that not make the whole LLP resident?

2. Given that the majority of the LLP income derives from UK entities paying for UK resident members time, would that not make the LLP resident?

3. Given that in the UK, members are taxed on their share of the profit arising in the year, as defined by the partnership deed, how can a later allocation of funds be taxable, especially if the member has left the LLP?

4. If the position is that the later profit allocation is taxable, then this arrangement is a tax deferment scheme. Can they point to part of their marketing materials or later communications that clearly and obviously explains this?

I could go on.

1. I guess that we can not prove that
2.They advertise that they are international company with worldwide income.
3. Would be interesting to see what does the UK law say about it.
4. I guess with them registered in Singapore we can't do much about it under UK legislation ? Can we sue them ?

[Iliketax]

Perhaps, as they seem to be in answering mode, you could call them again and ask the following:

1. Given that the members of the LLP are mostly UK resident, would that not make the whole LLP resident?

2. Given that the majority of the LLP income derives from UK entities paying for UK resident members time, would that not make the LLP resident?

3. Given that in the UK, members are taxed on their share of the profit arising in the year, as defined by the partnership deed, how can a later allocation of funds be taxable, especially if the member has left the LLP?

4. If the position is that the later profit allocation is taxable, then this arrangement is a tax deferment scheme. Can they point to part of their marketing materials or later communications that clearly and obviously explains this?

I could go on.

1. It doesn't matter. The concept of residence is relevant for individuals and companies. It has no bearing on the tax treatment of members of a tax transparent LLP. For completeness, if a Singaporean LLP was not considered as transparent for UK tax then the fact that most of its "owners" or "employees" were resident in the UK is again neither here nor there.

2. Again, it doesn't matter. And no, it wouldn't (if the LLP was not transparent).

3. I didn't think people were receiving funds now. If they are, the post-cessation receipts rules would be relevant. If not, then that's an important question. I'm assuming it is a s857 partnership so a UK domiciled partner is taxed on the profits allocated in the year (and a non-dom would be taxed on their share of the LLP's UK profits and on a remittance basis on their share of the LLP's non-UK profits), not when they receive cash. So someone is saying (i) we've got more profits in a later year, and (ii) for some reason you are taxed on them even though you are no longer a partner. I've no idea why they are saying that but (i) could be because they've decided to release some provision they created a while ago and which is no longer needed (so if it was me, I'd be wondering if they applying GAAP properly?), and (ii) could be because what ever they are saying has happened falls within the post-cessation receipts rules. But I have no idea what the facts are.

4. I've no idea what the arrangement is.

[webberg]

Is an LLP tax transparent?

I'm sure a recent case held that an LLP is separately tax personality?

I'm unable to look it up right now, but I recall the question was over whether HMRC had opened an enquiry into the "correct" entity.

Clackmananshire BPRA perhaps?

[Iliketax]

Is an LLP tax transparent?

Singaporean LLP? No idea. But as I've said before, if I was a participant in one of these schemes I may well be arguing that it isn't and so the April 2019 loan charge is less of an issue (but there would be other issues).

UK LLP with a business? Yes

I'm sure a recent case held that an LLP is separately tax personality?

I'm unable to look it up right now, but I recall the question was over whether HMRC had opened an enquiry into the "correct" entity.

Clackmananshire BPRA perhaps?

Yes, Inverclyde/Clackmannanshire.

That case has nothing directly to do with the underlying basis for taxing individuals. Similarly, it has nothing to do with whether an LLP is tax resident.

It was "just" about whether a piece of tax fiction extends to the TMA. More specifically, does the fact that a UK LLP is actually a body corporate, or does the fiction that it is a partnership, apply to the TMA.

My guess is that the "just" bit is actually quite important and so we will end up with retrospective legislation quite soon. But who knows?

As an aside, one place where the residence of an LLP with a business (as opposed to its members) may make a difference under UK tax law is under MDR. But I would guess that is quite a minority sport for contractors and their advisers (and doesn't change how the individual partners are taxed).

[webberg]

That case has nothing directly to do with the underlying basis for taxing individuals. Similarly, it has nothing to do with whether an LLP is tax resident.

It was "just" about whether a piece of tax fiction extends to the TMA. More specifically, does the fact that a UK LLP is actually a body corporate, or does the fiction that it is a partnership, apply to the TMA.

My guess is that the "just" bit is actually quite important and so we will end up with retrospective legislation quite soon. But who knows?

Agreed it has little to do with resident or not but it is indicative of the fact that what HMRC thought an LLP was (and therefore how they could open enquiries) and what the TMA says it is are (presently) different.

That case has huge implications given that almost all film schemes were LLP driven and if HMRC is found to have applied an incorrect means of opening enquiries, mayhem could ensue.

As you say, retrospective law to "correct or clarify" the situation is inevitable.

(I'm told HMRC has already assigned a team charged with "safeguarding" their position, post decision).

[vishaal]

I joined Procorre after a collleague had their tax affairs signed off and my accountant ok’ed all the information they provided on how the LLP functioned - including a written statement that the LLP would pay all taxes on a yearly basis so you did not need to forward plan.
A year ago I was investigated by HMRC and started to ask questions. I also got a letter out of the blue about a capital overdrawn account. At that point I stopped using Procorre. A year on they still haven’t answered my questions. I have sent half a dozen emails and they are just ignored.
The bottom line as I understand it is in 2019 Procorre will, via an incoming tax law, declare all monies held in the capital overdrawn account as income. So you will get a single huge tax bill, with a lot of it at the 50% tax rate. This has been a scam since the beginning.
Please add me to any relevant forum/WhatsApp group.
We need to get together and fight this, although I’m not sure how much Procorre have covered themselves.

Hey Guys, I have received a mail from the HMRC in this regard. Is there a WhatsApp group? How could I join it please?

[frontmen212]

Overdrawn Capital Account...b*ll

Hi All,

Firstly I wish I found this thread before I declared the 1st of 2 "Profit Shares" from Procorre in this years tax return so I have 13K to pay on Jan 30 2020 happy new year to me!

I have been kicking up a real stink with Procorre and Anne O'Donnell directly on LinkedIn and putting comments on everything Procorre puts up asking for a reply as you are all aware they dont like to reply to emails asking questions.

I have now received an email saying I will need to declare £40K profit share next year ffs!

I havent worked for Procorre for over a year now and permantly employed so my salary is stable but I dont have the money above to pay, I have asked several times how I had an "overdrawn account" seeing as the money I sent them they basically sent back in two parts minus their cut so how is it "overdrawn". My point finally you are saying...what action have any of you taken and have any of you spoken to HMRC in regards to this being a "loan scheme" or how have you declared this substantial "Profit Share"?

I am also trying to find the link if anyone knows it about making a complaint on being mis-sold a financial product as to my understanding Procorre insisted that the "drawings" part of the money paid was untaxable, how gullable I was then....

Be good to hear from any of you and see if we can get Procorre a kick up the bum from HMRC the cheating b*stards!

[cojak]

I have been kicking up a real stink with Procorre and Anne O'Donnell directly on LinkedIn and putting comments on everything Procorre puts up asking for a reply as you are all aware they dont like to reply to emails asking questions.

That's the way to communicate with them!

[Fred Bloggs]

Procorre insisted that the "drawings" part of the money paid was untaxable, how gullable I was then....

Oh dear.

[webberg]

as to my understanding Procorre insisted that the "drawings" part of the money paid was untaxable,

Do you have any written material as to your understanding above?

Materials I have read on the scheme - admittedly dated in 2019 - do say if you read them all the way through that the profit share is taxable even if the claim is that this is in a later year.

If you have something that says otherwise, then you have a chance of a clam for mis-representation.